India: Genesis Of The Arbitration And Conciliation (Amendment) Bill, 2018

Introduction

Alternate dispute resolution (ADR) has gained prominence in the country in recent times; arbitration being the forerunner amongst all such ADRs. Even the Courts have been encouraging ADRs  citing several benefits. Thus, to keep pace with the international arbitration practices, improving and hence instilling value and trust in India's arbitration procedure, certain amendments were proposed in the Arbitration (Amendment) Bill, 2018. The said change would surely help in promotion of India as a preferred seat of arbitration. The proposed amendment bill inter alia intends to bring about 6 prominent changes in the existing Arbitration and Conciliation Act, 1996. The proposed amendment are in-line with the recommendations of the Sri Krishna Committee Report, 2017. The proposals are discussed as under:

  1. Creation of an Arbitration Council of India: The Bill proposes creation of an Arbitration Promotion Council of India (APCI) to formalize the processes. The said Council would work towared suggesting effective corrections and/or improvements in the practice to promote India's recognition as an Arbitration Centre internationally, which will ease the process of multiparty international arbitration as well. The Council will help laying down professional guidelines for progression of the jurisprudence of arbitration law and practices in India. The Council is proposed to be an autonomous body free from any governmental intervention which will will help maintain neutrality even in cases where the Government is party to an arbitration.

    Genesis – India, currently has more than 35 arbitral institutions which work differently without having a common minimum standard. This coupled with lack of good infrastructure, facilities and services have acted as a deterrent in India being chosen as a seat for international arbitration. In view of the same, the Committee has recommended constitution of the said Council to establish a benchmark to assess arbitral institutions in India and to prescribe a minimum common standard.
  2. Appointment of Arbitrators: Presently, Section 11 of the Act provides for the appointment of arbitrators by the Courts. With the objective to reduce the burden on the Courts and to make the process quicker and hassle-free, in accordance to the doctrine of Competence as provided for under Section 16 of the Act, the amendment bill proposes appointment of arbitrators by designated arbitral institutions.
  3. Exclusion of International Commercial Arbitrations from the purview of Section 29A: Section 29A as appended by the 2015 Amendment to the Act, inter alia mandates the completion of arbitral proceedings within a period of 12 months. The Amendment Bill proposes to exclude the International Commercial Arbitrations from the purview of the said timeline as it has been subjected to a lot of criticism from the international community on the grounds that it is not practically possible. For other arbitrations too, the amendment Bill proposes that the 12-month period should be calculated after the completion of pleadings.

    Genesis – The grounds on which the International Commercial Arbitrations are proposed to be excluded from the 12-month timeline are:

    • Arbitration, in its entirety is based on party consent and autonomy. The current S. 29A is argued to take away party autonomy by prescribing a mandatory time limit where the parties have no say, which is contrary to Art. 19 of the UNCILTRAL model law from which the Arbitration Act is inspired. Every arbitration has its own nature, size and complexity and this one-size-fits-all approach taken under S. 29A is not suitable in all cases.
    • S. 29A pushes for greater judicial intervention by forcing parties to approach the court where the arbitral proceedings are not completed within 12 months. This again, may act contrary to the objective of the Arbitration Act of limiting judicial intervention.
    • Another factor for this proposal is that established arbitration jurisdictions across the world like that of UK, Singapore and Hong Kong do not contain provisions similar to S. 29A. Timelines for arbitral proceedings are usually agreed between the parties themselves or between the parties in consultation with the arbitral tribunal and the arbitral administration, which is administering the arbitral process.
    With regards to domestic arbitration proceedings, the Report opined that the timeline of 12 months should be fixed post the completion of pleadings as it was increasingly seen that the one-year period to be calculated from the date of constitution of the tribunal was proving to be insufficient for the purposes of completing arbitrations. However, this too has faced much criticism as it is difficult to determine the exact date of completion of pleadings as parties can amend pleadings at any later date and also provide for rejoinders at any stage.
  4. Confidentiality in Arbitral proceedings: Currently, the Act provides for confidentiality only in cases of Conciliation. However, the Amendment Act, 2018, proposes for an incorporation of a new S. 42A by which confidentiality will be provided in arbitration proceedings as well (barring awards).

    Genesis – The international community, if not explicitly, at least impliedly provides for confidentiality clauses in the agreement. The Indian legislation provides for no such recognition. Keeping the objective of the enactment in mind, the Report proposed for recognition of confidentiality in arbitration proceedings.
  5. Immunity for the Arbitrator: The Amendment Bill proposes to provide more freedom to the arbitrators by granting immunity to them from any legal proceedings for acts and omissions done during the course of the arbitration proceedings so that they can exercise their function to the best of their ability without any compulsion or fear.

    Genesis - The immunity of arbitrators from liability for acts or omissions in the discharge of their functions as arbitrators except in cases of bad faith is a well-accepted principle internationally. It is necessary to ensure independence of the arbitrators and to preserve the integrity of the arbitral process from interference by protecting arbitrators from unnecessary harassment by parties. However, the present Arbitration Act does not provide for such immunities. With the objective to bring Indian legislation at par with the international practices, such proposal has been made.
  6. Applicability of the 2015 Amendment: The Amendment Bill proposes the incorporation of a new Section 87 to the Act. The object of the section will be to clarify that unless otherwise agreed by the parties, the 2015 amendment will not apply to:

    1. Arbitral proceedings that have commenced before the Amendment Act, 2015,
    2. Court proceedings arising out of or in relation to such arbitral proceedings;
    and shall apply only to Arbitral proceedings commenced on or after the commencement of the Amendment Act, 2015 and to court proceedings arising out of or in relation to such Arbitral proceedings.

    Genesis - Section 26 of the Amendment Act was in discussion. There have been contrasting judgments1 on the issue whether the 2015 Amendment Act will apply to court proceedings (i) filed after the amendments came into force in 2015, but in respect of arbitrations commenced before the amendments; and (ii) court proceedings which were pending at the time the amendments came into effect but were decided thereafter. In this context there were conflicting decisions of various courts.

Recently in the case of BCCI v. Kochi Cricket Private Ltd,2 the Supreme Court opined that the 2015 amendments would apply to all court proceedings filed after the amendments came into effect (October 23, 2015), regardless of when the arbitration was commenced. Crucially, it was also held that the 2015 amendments would apply to pending proceedings that may have been filed prior to the amendments but were pending at the time amendments came into force.

Conclusion

The Ordinance is long due and is awaiting the approval of the houses right now. However, the genesis of the amendments reflect the international best practices approach being adopted by our legal regime. Only once the amendment is enacted will we come to know whether the Government took note of the Supreme Court's interpretation.

Footnotes

1. Rendezvous Sports World v. Board of Control for Cricket in India 2017 (2) BomCR 113, Ardee Infrastructure Pvt. Ltd. v. Ms. Anuradha Bhatia 2017 (2) ArbLR 163 (Delhi), in Electrosteel Casting v. Reacon Engineers AIR 2016 (NOC 764) 349, New Tirpur Area Devp Corp v. Hindustan Construction O.S.A. Nos.21 & 22 of 2016 (30.08.2017 – Madras High Court), Enercon v. Yogesh Mehra, 2017 SCC OnLine Bom 1744

2. 2018 (4) SCALE 502

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